Concerns have been raised that the planned increases would be unaffordable for businesses hit by the coronavirus pandemic. To achieve the Government’s pledge, NMW rates would have to increase by up to 6.2 per cent this year, and the NLW would need to increase from £8.72 to £9.21 per hour, a 5.6 per cent rise. With many employers avoiding or reducing the need for redundancies through the coronavirus job retention scheme (CJRS) and, from 1 November, the new Job Support Scheme, a freeze on NMW rate rises in April 2021 may help protect some jobs once the support from the Government ends.
However, the LPC (Low Pay Commission), which recommends the annual rate rises of NLW and NMW to the Government, believes the pandemic has brought the importance of low-paid workers from many vital services to the fore, including health and social care and the production and distribution of food. This and the effects of the coronavirus are therefore likely to be key factors in the LPC’s recommendations to the Government in October. Normally the LPC’s recommendations are ratified by the Government in the Autumn budget. It will be interesting to see if the Chancellor deviates from this path.
Enforcement is still a priority
Whatever the Government decides on next year’s rate rises, enforcement must still be a priority, according to the LPC.
In 2018/19, 220,000 workers were underpaid NMW by a total of £24.4m. However, the LPC estimates that 360,000 workers entitled to the NLW are still not receiving it, and the trend in recent years is that NMW underpayments are rising. Retail, hospitality, cleaning and maintenance employers continue to account for the highest proportion of non-compliance.
The LPC acknowledged in its report that, in many cases, fine margins of non-compliance indicated employer error or slow adaptation to incoming rates were the main cause. Many employers consulted by the LPC prior to compiling its report shared a lack of confidence in the regulations, given their complexity, and a belief that they’re designed to 'trip them up'. As a result, LPC has recommended improved guidance from the Government. However, that may bring little comfort to employers as HMRC has indicated there will be no let-up in its enforcement of the NMW following a brief pause in activity during the Government’s lockdown.